Rail revenue $80M short, but officials not worried


POSTED: Sunday, July 05, 2009

The city is falling more than $80 million a year short in revenues to build its 20-mile rail system between Kapolei and Ala Moana.

But city transportation officials say they expect construction bids will decrease during the recession, helping them to meet costs, and that revenue from the half-percent increase in the general excise tax on Oahu will rise once the economy rebounds.

City Transportation Director Wayne Yoshioka said the decrease represents a “;snapshot”; of the economy and does not reflect rises expected eventually

“;If you look at today, it is down, but collections ... should even out,”; he said.

Yoshioka said the $80 million figure is derived from an annual average and doesn't reflect the decreasing cost of construction and the demands for construction money expected to vary throughout the development period.

He said the city's estimates were made at the economy's peak when building costs were high, and the bids are coming in now 20 to 30 percent lower.

Yoshioka said the city developed its financial plan working closely with Federal Transit Administration officials who have experience planning rail systems.

“;We don't make a move without consulting with our federal partners,”; he said.

Yoshioka said the city has a contingency fund built into the budget and does not expect to raise taxes further or find other ways to raise revenues for rail.

The city plans to break ground for the 20-mile rail system by the end of this year and continue construction through 2019.

The half-percent surcharge is expected to be applied to Oahu taxpayers until 2022, he said.

Yoshioka said the city has on average projected paying about $250 million annually, plus interest, over 16 years for the rail system.

But collections from the half-percent general excise tax surcharge on Oahu in fiscal 2007-2008 totaled $169.1 million and were down more than 3.7 percent for the first 11 months of fiscal 2008-09—through May, according to the state tax office.

The decrease is less than the 8.4 percent drop in general excise tax revenues statewide for the same period.

The city has collected about $354 million in revenues through the half percent excise tax imposed on Oahu residents since 2007.

City officials expect the federal government will cover $1.4 billion or more of the $5.4 billion rail cost.

Yoshioka said the construction of the rail system is the “;biggest stimulus project”; on the economic horizon including the direct and indirect creation of an estimated 10,000 jobs during construction.

“;These people will all pay income and GE (general excise) taxes, spend money in the economy and make major purchases,”; Yoshioka said.

Yoshioka said in an accelerating economy, general excise taxes can rise quickly, compensating for decreases during the economic downturns.

But Councilman Charles Djou said he continues to feel the rail system is financially unfeasible.

“;The burden we're putting upon the taxpayers of the City and County of Honolulu is astronomical,”; Djou said. “;It's very troubling.”;

Djou said the increase in capital improvement projects budget during Mayor Mufi Hannemann's administration was troubling, going from a half billion to $1.7 billion.

Of the $1.7 billion, $1.1 billion has been authorized in general obligation bonds to finance the rail system.




New drawings to be shown at last rail project meeting

        Honolulu transportation officials plan to hold the third and final community workshop Wednesday about plans for two stations in Waipahu along the planned 20-mile rail line between Kapolei and Ala Moana.

The public meeting is scheduled to take place between 6:30 and 9 p.m. at the Waipahu Intermediate School cafeteria.


City officials plan to unveil new renderings and sketches of the stations at West Loch at the intersection of Farrington Highway and Leoku Street and the Waipahu Transit Center at Farrington Highway and Mokuola Street, below the Waipahu Civic Center.


The city said the ground-level stations are based on the ideas and opinions expressed by community members at the first two workshops in April and June.


The initial 6.5-mile segment of the transit route will run from Kapolei to Pearl Highlands near Leeward Community College.


The city is scheduled to break ground for the project at the end of the year and begin service for the first leg of the transit route in 2012.


For more information on the community workshops, contact the project office at 566-2299 or e-mail .(JavaScript must be enabled to view this email address)


—Star-Bulletin staff